Uberfliprevenue, acquisition & funding

Intro hello everyone my guest today is randy frisch he's the president cmo and co-founder of uberflip a content experience platform that empowers marketers to create content experiences at every stage of the buyer's journey he's defined and led this movement prompting marketers to think beyond content creation and truly put their customers first by focusing on the experience all right randy ready to take us to the top let's do it all right so this has had a lot of you've had a lot of success doing this uh you know it's now you now have a big conference i think called if you pronounce it conic 750 plus marketers that's annual yeah we do that in the summer it's actually just about a month away depending on what this airs that's very good so walk me through the company today what's the company do and what's your revenue model i guess pure place ass yeah so we're a sas platform interesting history but i won't take you through it all early days online sales learned that we built something that was built for a more sophisticated marketer uh and kind of moved up to uh mid-market enterprise type of sales so you can imagine that there's a range in acv there yeah that gets into six Average Revenue Per User (ARPU) figure deals what's your sweet spot today though would you say i would say you know i'll have to be careful with this because someone will you know take advantage of me but probably they already are taking advantage of you by the way hopefully they're taking advantage of the solution right there you go but uh i would say north of 70 is is very typical these days uh we're selling to big organizations but the the exciting thing obviously and i'm sure a lot of your guests talk about this is when we expand in those big organizations and you know part of that is you know tied to the conference is how do you bring people together so that they can learn about the fact that you know what we built is not for content marketers it gets confused because we say content and everyone you know in organizations listening to this instantly thinks oh well that's the content marketer well the content marketer their job is to create content the challenge that we try and push companies on is how do you leverage all that content how do you think about your demand gen strategy and how that would be more accelerated with content or how do you enable sales better with content so when we start to think of content in the mix then a company grows versus we all hope that you know leads will reign in from an inbound strategy so so what are you upselling against is it feature based up selling across your product suite seat based or some utility-based upsell value metric yeah um i won't get into like the actual you know details because it's boring but the simple way to think about it is the more you want to personalize to your audience the more you're going to pay and and it works well in terms of how we sell to different size orgs when you think of larger organizations companies like an aws who'd be a customer of ours they've got so many different verticals they sell to accounts that they sell to et cetera when you think of a smaller high-growth company a lot of them that probably come on this podcast uh you know those ones they're still very focused in their go-to-market so they have less personas or less targeted accounts because they're trying to get off the ground so you're naturally going to personalize less so think of it that way the more you want to personalize we naturally scale so it's a nice nice business model which yeah but how do you how do you qualify so like how do you quantify that the reason i'm pushing here on this is like so i've probably interviewed about 60 ceos with between 50 and 180 million in arr right and all of them are have a very clear like axes on all three of those things there's there's a feature based up so there's a pricing a utility-based upsell like for example twilio number of api calls and there's a seat based up so as well have you gotten hyper specific and focused on what the util the value metric is the utility metric is inside of uberflip yeah so if you're if you're asking what is the act like what is our equivalent of twilio's api that's what i'm asking yeah it would be what we call streams and hubs okay that's getting into the weeds but think about it this way a lot of us when we let's say someone was doing a retargeted ad right which is not what uberflip does but they use the solution to send out a retargeted ad a terminus or rollworks one of those types of companies and they direct you to a piece of content many of us just like high-five each other and we're like nice they clicked on the ad they engaged in the content to me success is where do they go from there how do we accelerate that buyer journey so that we don't have to get them again on another channel so how do i get them to six other pieces of content in one in that one visit that would be how do i take seven pieces of content altogether in theory there and create a stream that's one of our variables okay so the more streams that you have um i'll give you an example a company called snowflake uses us they're like awesome company that's you know grown like unicorns and they they actually have built targeted streams down to the account level so if they're selling to a specific account say it's uh pepsi versus john deere they may have different content based on the industry they're selling into the account different factors and they've built last i expected spoke with their customer there about 1500 of these streams got it okay so you're selling against upstreams and hubs yeah streams and hubs that's great give me your okay that now that we kind of get the context of the company right give me your backstory here when you when you guys write the first line of When was UberFlip founded? code uh so interesting background i you know for uberflip it would have been in 2011 but uberflip was more than a pivot it was a relaunch of a company that was called magazines that my co-founder of uberflip started back in like pre-2010 like back in 2007 and it was a pdf solution right that became our mvp for uberflip because marketers had pdfs and fast forward we realized that pdf was just one form of content that they were trying to manage so the idea was how do we bring all those various forms of content blog posts ebooks videos uh any form of content that comes in the future together so that we can put the right mix of content rather than let me show you all my ebooks yeah like i always kid with people i don't go to someone's website and say oh i'm going to learn what these guys do by reading ebooks so randy if you quantify if you quantify all this right so one of the things i would like to ask is how creative founders were early on so do you remember how much you guys you and your co-founder spent on your mvp before the first dollar revenue uh for for yo of my co-founder it would be a way more time than me because he had you know tons of you know crazy can i swear on here yeah yeah just but what do you think the total amount is into the company before your first dollar revenue as the product is today not the pdf solution back then but as it is today oh money in there was zero external capital in uh to that point uh we didn't take any capital until just last year how much total have you raised to date Amount of capital raised to date uh so we did a 32 million round in 2018. actually i should say we did a safe uh about a year or two earlier that was just under a million dollars uh that rolled in with that so we'll come back to that a second but again back to those early days so no no money in but i mean how did you did you guys put in money yourselves was it just your sweat equity you guys are both developers you coded it yourself yeah we put in some of our own money um you know a few hundred thousand dollars each uh a lot of sweat equity you know taking puny salaries all the good stories that you hear so a lot of people so when did you get your first dollar of revenue again on the current product as it is today the current vision on the current product right out of the gate because when we say 2011 just to be clear uh 2012 is super flip but we we had transfer over revenue from the old product because we had a mix of our current customers that are marketers and um i got to do this lights thing uh otherwise we're going to be in dark here this is this is why this is way more fun that will be the thumbnail for the video it will be you you're gonna be like what was he doing but but uh but we we had you know not all our target segment i would say on day one of revenue uh that was only a small amount because who were you targeting media sorry who were you yeah who were you targeting those early days like what's the title of the person you were selling to and what kind of organizations yeah it's an interesting you know shift that we had to make over the years we were selling into the content marketer right so what was that title like head of content marketing uh it's usually a content marketing manager in that in those days there wasn't a lot of director level vp level that shifted a bit okay but even today we got caught up thinking that that was our buyer for too long eventually realizing that and i mean no offense to content marketers but their skill quite often is creation right they're great storytellers writers a lot of them were journalists or editors in their past career and then in marketing orgs we expect them to figure out how to do distribution determine demand spend and determine roi and they should understand that at a high level don't get me wrong but you know the the majority of people who actually figure out how we go to market in our marketing teams our demand generation marketers digital marketing kind of you know gets thrown in there up to the vp etc so we had to eventually you know realize that trying to build a business around content marketing was actually dangerous for us and we distanced ourselves from that term which took us to the idea of content experience as a term uh that we we coined and have built an industry around gotten a lot of coverage thrown the event that we taught that we talked about randy is it fair to say your first call at 10 customers though or content marketing managers i would say yes and how did you uh just because i want to get a bunch more and so quickly here if you can how did you actually find them how did you target was a linkedin search a facebook ad something else uh in many cases it was content driven right because for us uh you know content marketers the irony was we were a solution for content marketers and we were using content marketing to educate content so what was the blog post that worked really well for you early in the early days to bring in those new content marketers uh there's one that i wrote in the early days called uh i may get the heading wrong but something along the lines of why do we send our inbound leads outbound right so i kind of you know talked about i i called it the social bar of death you know the twitter logo the facebook logo that we all put on our homepages and my point was we spend so much money to get someone to our page only to send them to mediums that we don't control i'm not against twitter or youtube i just don't think we should send people there to consume our content we should own their journey once we have their attention so that we can track them and learn so what search terms this rank really well for that brought in a lot of new inbound for you do you remember yeah uh well early days we were very ebook focused so it would definitely be terms around you know ebooks and uh you know better uh better understanding of you know marketing analytics because we were tracking you know the background of that you know sometimes i would also bring the wrong person so it's a tricky thing you know we didn't want the the marketing operations manager at that point which is very much with marketing analytics so those are the first 10 folks obviously you pivoted your focus over the past five six years how many customers are now serving today Customer count uh some numbers inflated uh we focus on you know call it roughly 500 that are more in that actual uh iep ideal account profile you know match a lot of the ideal customer profile demographics details size of organization but the actual number is just over a thousand if you include some of our earlier day you know online signups like long tail folks you know paying cheaper grandfathered prices exactly yeah so can i take that 500 Annual Recurring Revenue (ARR) over $10m in revenue times the acv you gave me earlier 70 grand i mean that put you about 2.9 million a month right now in revenue uh no that that number would be off we don't share those numbers exactly publicly but i'll tell you we were over 10 million in revenue when we did our our financing yeah that was which is funny yeah i mean so so is it on i mean is it a stretch goal for you to say that you you guys can hit 20 million by the end of this year in terms of run rate or does that have to wait till 2020. uh fiscal is doable what's your fiscal end our sorry a calendar is fiscal uh calendar is doable fiscal would be tricky it's your it's your end anyway soon for everyone in one world so we all get confused by these terms but uh but yeah i would say that calendar is doable um you know there's it's it's you know we're in one of those industries where you know we don't pretend to have 100 year-over-year growth we never did that's probably why we didn't raise capital early days we didn't have that you know we're a rocket ship growth story going on we had more of the sustainable growth rate right how do we grow year over year at a sustainable amount and that that growth rate for us was always somewhere between wave your arms again do a dance there we go uh between thirty and fifty percent year over year for us is kind of been our range and you know some to be honest we get depressed when it's in the 30s and then you know people around us remind us that those are our bad years yeah that's not that's that's not bad i mean right so and you said that last that was september last year you were into the i know it would have been april of last year okay april so so if we take so we're now getting to august of this year UberFlip revenue in 2018 so if we go back exactly one year you're basically doing something like 11 or 12 in terms of run rate back then yeah in those ranges yeah so why i mean why raise the capital i mean it sounds like you guys knew how to do this without capital now you just took them i don't know how big it was but you took dilution you're going to have to drive burn now yeah no it was a great question i i'd say in a nutshell uh you know we did we did me and my co-founder yov we did a lot of soul searching at that point yeah we we didn't have any firm exit opportunities at that point but we definitely wanted to take some chips off the table so there was a secondary component to what we explored and were able to do uh we you know we had actually a couple of nibbles wait hold on explain that randy just sorry i i appreciate founders that understand how to create liquidity not only for yourself but for early employees that took the risk with you and i think a lot of people don't actually understand how that works so just explain quickly you raised 30 million what percent of that went towards secondary verse operations and then explain how it works so i don't share that we don't share those numbers uh publicly okay we'll explain how it works but i'll explain how it works so so the the idea there was and it's interesting before i explain that i'll set some context for everyone listening uh you know we we went through this education ourself in the process that you've kind of got you know the traditional vc who wants their 10x return and wants to put in a ton of money wants you to spend that money very quickly and it worst case you need more they'll fund you as long as they see that growth on the other side you've got pe firms who very numbers based you know many of them have thesises where they you know you run their game plan they bring in been there done that execs and and we felt like neither of those appealed to us we weren't ready to give over the keys and on the other side we didn't want to become the company that was going to burn a crapload of money to try and get to 100 year-over-year growth like that wasn't that wasn't our mindset then we discovered these growth equity firms uh that was the term that was being thrown around with us and it we honestly never knew they existed i think that's because a lot of them are more interested when you get to that 10 billion recurring revenue number and up because they're looking for a lot of the ingredients similar to the pe firm but they're looking to kind of like a three to five x return over that many years and that that exit make could be to a strategic it could be to a pe down the road and i think that's what appealed to us is we felt like you know to try and sell the company not that a buyer existed you know we'd be selling ourselves short of the potential that we had um but you know this would give us that runway now they most of these growth equity firms we found were very uh open to the idea of a secondary meaning that as it is that we could sell you know simply we could sell some of our equity as part of the deal so it the other nice thing that does is you know we talk about 32 million dollars and yes i don't share the split but you know to understand it it's not that the 32 million dollars inflated us to a valuation where you would figure out what that value would be whether it's anywhere from five to ten x as as people would do when they're racing around we didn't necessarily have to do that on the 30 coming in we did that on the amount of money coming in and the rest of it yes does cause further dilution to the rest of our shows because we're selling those shares but but not in the same way yeah guys yeah so i'm gonna try and say that in a sentence you correct me if i'm wrong guys so what happened here is right uh they raised 32 million dollars right with updated right which is known for this kind of deal of that 30 now this i'm speculating now this is not from his mouth i'm speculating but let's say that 10 million of that went towards helping early founders and employees basically get liquidity what that means is if if you guys owned as as founders 80 of the company maybe you sell five or ten percent of your equity right uh for that 10 million you guys take cash off the table that 10 percent of your own equity that you sell does not dilute the rest of the cap table what does dilute the rest of the cap table is the other 22 million that came on and stayed in the company on the company balance sheet for operations of the secondary is that accurate absolutely now question for you you use sas capital 3 million 2016. was that effective for you in terms of you know whatever you did keep on operations a year and a half later having it be less dilutive in other words were you able to turn that three million you know what relative to your cac and payback and actually drove ar booking growth yeah so uh so first i'll say i really love the guys at sas capital great partners todd is is fantastic there updata we've been really you know lucky to have as a partner too in in retrospect looking back it's always easier to say we we i never needed that money from sas capital we never actually leveraged it but it gave us the comfort to go out of our comfort zone right which meant what those specifically driving up your payback periods to 18 months you'd be more aggressive with customer acquisition or what yeah it was more being it was a combination of being more aggressive with customer acquisition more hiring that we wouldn't have been comfortable to do even hiring some more senior folk where we would always you know we're very fortunate we found some awesome people who are up and comers and they they've kicked ass for us over the years what's your randy Employee count what's your team size today how many people uh we're just under 140. got it and then quantify that cac risk here for a second Customer Acquisition Cost (CAC) so to get a new seventy thousand dollar acv account are you comfortable sending the full 70 grand so 12 month payback to get the customer or are you longer or shorter uh so sorry lights are going i know no worries at this time uh sorry the so we yeah we'll we'll i mean we were able to manage that in a couple of ways so short answer to answer you is yes we're willing to spend even back then we're willing to spend more upfront to get get that customer but there's certain things that we learned along the way and i'm not saying we knew this on day one we were yov and i were both uh tech rookies going into this um in you know cash flow is an example just you know moving to upfront payments uh from monthly recurring credit card transactions was such a big change for us i mean it makes perfect sense but you don't realize the impact it can have to cash flow so those were some of the things that you know when we took the sas capital money we knew we were going to shift there we just you you don't know if you're going to be successful yeah you don't know how many people you'll convert yeah exactly up front so we ended up converting more than we would have hoped to upfront which reduced the need to to kind of take some of that money from sas capital we did we did dip into that facility but it was more you know i can't remember what our equation was but we always wanted to have like x times payroll in the banking in the bank account yeah ready to to pull on but you know sas capital was great i mean my only regrets and this isn't sas capital this is this is our own negotiation i wish we didn't do warrants tied to it um i you know we did it so that we keep the interest rate down a little bit more they're they're flexible on whether warrants or internet they just need a higher interest rate so it's not all the thing is like it's not like i don't know how special you guys were when you're modeling but whether it's and this isn't a hit on sas capital but you look at lighter capital svb any of these revenue-based financing companies but was yours revenue based or was it a term loan a fixed interest rate it was uh revenue it was a it was a multiple of ar yes but you paid back on a percent monthly of gross receipts correct uh some of this language i'm going to forget slash gets blurred in my mind to be complete let's be honest with you and your listeners i don't want to i don't want to misspeak but but basically they were they were term loans but we could take in tranches and there were minimum amounts and a payback and a you know an early payback penalty and and things like that so we you know that that facility eventually grew but we when we actually took the money from from updata we uh we paid off the sas sas capitals so no debt no debt sitting on the books uh at that time no we've we've got oh today okay well we're not tapped into it but you know we ended up working with svb well we i've always liked i i love sas capital i've always liked the team at svb i think they're good people but you just said you don't like warrants on the sas stock deal and svb usually attaches warrants to their lines as well uh we don't have warrants okay so there are no warrants on your sv you're sure about that yeah yeah that was important you know it's funny it's not snuck in on page 35 and paragraph three if it is yeah it's gonna you know someone if there is a difficult conversation with someone here but it's funny because i look back on those warrants with with sas capital and it's so easy to look back it's like oh why did i have to give that we gave it at a choice but but i ultimately wish that we didn't because and there's not a knock on sas capital again but you know they were there for money they didn't help us grow the business in any strategic way that's that's and they don't lie about that that was that's their purpose um and you're paying them back a penalty it's usually they usually take a 1.3 to 1.4x repayment cap so you're paying back like 3.5 million and i mean the cost of capital is like 500 600 grand so when i'm when i'm dealing with a bank or i'm taking money in that way i want there to be a very prescribed rate where i understand going in and i stand at the end this is my guaranteed payback to them so i justify the risk that i'm taking on and you know the cost of that risk you know that i'm able to take because of them i don't like to give them more upside and that's just me i mean i know different entrepreneurs will think about that differently but that's just how i think about it yeah let's uh i just realized we're way over time here so some quick rapid fire stuff for you what's the breakdown of the 140 team members between engineers and quota carrying folks uh so engineering's close to 40 sales is just over 30 cs uh is about 30. um so 60 kind of cs and sales but 30 are quoted caring yeah we've got a large marketing team something i'm always criticized for but yeah no nothing wrong with that i have lots of ways to defend it even though i'm often well are people are people are people sticking so when you look at your you know cs if you have a big cs team i'm hoping your expansion i'm hoping your net revenue retention is well north of 121 30 percent so i mean when you look at your churn plus your Gross churn expansion are you in that range yeah i we we're in good shape there i mean we can always be better at you know historically from a a revenue term perspective monthly we were around 1.5 percent you know like 17 18 annually our goal is to get that closer to one right um you know that's ultimately the goal that randy sorry i don't keep cutting you off but i want to make sure the audience like take gets takeaways here so one point right right now you're about 18 revenue turn annually on a gross basis 1.5 per month correct and does expand does expansion more than make up the 18 churn um i i think we have more work to do there and it's it's it is in in some quarters and then not in others and i think that's you know we've we're trying to do a lot now to become more proactive on expansion um i i think you know we see a lot of great expansion with the business you unit that buys from us um and but really that's not expansion right that's upsell the way it looks well i think it's the same thing there's just different ways to drive upsell you sell deeper in the same department but then you also want to get cross-sell to other departments and you know other teams and things like that internally we define uh the cross-sell as expansion and we define the internal department or the specific department that we've sold into as upsell yeah because they're they're increasing their use of the platform like we talked about at the beginning more personalization we need to do more we want to do more great but if we can actually get into it like aws is is a great example right because they have so many different business groups and so many different initiatives if we can get into some of those other regions there's a great opportunity there and we have a great partnership with them in general so it's you know a lot of hope there and randy how aggressive are you guys being right with your current capital structure with burn i mean are you comfortable burning like a hundred grand a month or does that keep you up at night are you actually casual positive where do you kind of put that stake it's it's a funny question because uh you know we we had some help when we did the the financing about a year ago and uh the updated guys uh you know they i'd say they're very disciplined in their approach i mean it's it's in their name updated they're all data focused and numbers focused but you know one of the the advices by the i guess you'd call them investment banker advisor that we used in in the process was like to them was you're gonna have to get randy and you'll have comfortable burning money right because we we had essentially bootstrapped to that point other than that million dollar save to you know to get over 10 million recurring so it was a we were gonna we we've had to adjust and and i've also had to let go of the rains i think part of that uh early days of the business i was a ceo in addition to you know president but you know now i'm i'm more cmo and more out there advocating for the company a big part for me was finding someone to take over those coo reigns who randy sorry before we get off on a tangent so today how much are you burning are we doing like a million a month 100 grand a month generally where are you i apologize those are numbers i just don't share but uh but it's it's very uh you are burning though you're not you're not casual positive we are burning but we have our mindset with the capital that we took is it gets us to our next exit right um i always say next exit not a final exit so were you raising for like 18 months of burn then that's usually what people would do The Famous Five no we we raised from the mindset of three years minimum okay got it so you raised for essentially 36 months of burn minimum yeah but really five like like i said that the mindset of up data is three to five x return in that many years um and that's our goals we want to get to that next exit needs to be for us a minimum of three to five x what that valuation is when we took money and the money that we took is designed to get us to that point yep very good let's wrap up here with the famous five one word answers if you can number one favorite business book i love start with why number two is there a ceo you're following or studying uh i'm i'm always just intrigued by musk yep number three what's your favorite online tool for building your company oh um uh i'm gonna go with i mean other than uberflip i'd probably say that it's marketing automation platforms uh which one i love them all they're all like one uh i will give some love to the one i use right now which is marketo number three f4 how many hours of sleep do they overnight i would say that i get at least six and what's your situation married single kids i am a very luckily married man i've got three amazing kids who are 12 10 and eight and how old are you i just turned 40 this past year very good and uh last question what do you wish your 20 year old self knew uh just to be confident in a room i think i think i...